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iamnumerate

Abolish stamp duty

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A long paper

https://static1.squarespace.com/static/56eddde762cd9413e151ac92/t/59f35a84f9619a618714a5df/1509120655818/Beyond+the+Call+of+Duty+.pdf

 

Some highlights

Quote
 
Taxing housing transactions keeps people in houses that are either too small, too
big, or too far away from jobs, which are especially harmful when the housing
supply is so tight, as it is in the UK today.

And it does cost buyers more money. 

Quote

Evidence from the UK suggests that the buyer pays only around two thirds of stamp duty, even though they hand over the full amount. In 2008 and 2009 the government temporarily cut stamp duty—a brief tax “holiday”. The average tax burdenfell about £1500, while the corresponding average sale price rose £600—implying

around 60% had been borne by homebuyers and around 40% by owners.

If I were a BTL landlord I would hate stamp duty to be cut and council tax raised, fortunately for the Wilsons etc - this will not happen.

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17 minutes ago, iamnumerate said:

A long paper

https://static1.squarespace.com/static/56eddde762cd9413e151ac92/t/59f35a84f9619a618714a5df/1509120655818/Beyond+the+Call+of+Duty+.pdf

 

Some highlights

And it does cost buyers more money. 

If I were a BTL landlord I would hate stamp duty to be cut and council tax raised, fortunately for the Wilsons etc - this will not happen.

How would cutting stamp duty (meaning landlords don't have to pay anything extra to buy more properties plus the price of their "investment" increases) while raising council tax (which is paid by the tenant) be bad for landlords?

The Government needs money (if they cut stamp duty they will increase it elsewhere). Young people have no money and if you target them they will flock to Corbyn. The old have money (unearned wealth). The best thing to do is to make everyone pay CGT on the sale of their main home but get rid of Inheritance tax.

Edited by fru-gal

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And that's why the one who should pay the tax should be the one who holds the asset. Council tax is a tax paid for a service provided by the council and could remain as it is.

And we know the story of LL saying they will increase the rents. We all know they are charging already the maximum they can get away with, no matter of their personal finance situation.

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7 minutes ago, fru-gal said:

How would cutting stamp duty (meaning landlords don't have to pay anything extra to buy more properties plus the price of their "investment" increases) while raising council tax (which is paid by the tenant) be bad for landlords?

 

It makes it easier for them to buy and stop being a tenant!  Also during a void the landlord pays council tax - makes it harder to raise the rent and risk a void.

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5 minutes ago, Freki said:

And that's why the one who should pay the tax should be the one who holds the asset. Council tax is a tax paid for a service provided by the council and could remain as it is.

And we know the story of LL saying they will increase the rents. We all know they are charging already the maximum they can get away with, no matter of their personal finance situation.

Very true.

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I can see what it causes people not to move however at this point if removed all I see happening is the seller will raise the price of the house so the buyer will be no better off really 

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4 minutes ago, iamnumerate said:

It makes it easier for them to buy and stop being a tenant!  Also during a void the landlord pays council tax - makes it harder to raise the rent and risk a void.

I disagree. Most people cannot afford property at the current prices. If you are a tenant in London it will just mean more properties bought up by landlords (since they don't have to pay SDLT anymore and have more funds than a FTB), more competition, higher prices while the FTB has to pay higher council tax while they wait for properties to drop in price (which they wouldn't as landlords will be buying up all the properties as they are not encumbered by 1) SDLT and 2) more liquidity in the market and older people/landlords tend to have easier access to money/mortgages). I actually think this would be terrible for tenants.

Edited by fru-gal

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3 minutes ago, fru-gal said:

I disagree. Most people cannot afford property at the current prices. If you are a tenant in London it will just mean more properties bought up by landlords (since they don't have to pay SDLT anymore and have more funds than a FTB), more competition, higher prices while the FTB has to pay higher council tax while they wait for properties to drop in price (which they wouldn't as landlords will be buying up all the properties as they are not encumbered by 1) SDLT and 2) more liquidity in the market and older people/landlords tend to have easier access to money/mortgages). I actually think this would be terrible for tenants.

Suppose it were only abolished for your first property? I.e Landlords still have to pay it?

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5 minutes ago, Nabby81 said:

I can see what it causes people not to move however at this point if removed all I see happening is the seller will raise the price of the house so the buyer will be no better off really 

Did you not see this bit

Quote

The average tax burdenfell about £1500, while the corresponding average sale price rose £600—implying

around 60% had been borne by homebuyers and around 40% by owners.

I think this should happen in conjunction with other reforms - no housing benefit in zones 1-4 for more than 6 months, no pension credit if your house is worth more than £500k etc, no housing benefits for immigrants who have not paid £10k tax in the last 3 years etc. 

Together they would increase liquidity and make prices cheaper

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52 minutes ago, Nabby81 said:

I can see what it causes people not to move however at this point if removed all I see happening is the seller will raise the price of the house so the buyer will be no better off really 

SDLT is too much money to be abolished and not replaced by anything.

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2 minutes ago, Freki said:

SDLT is too much money to be abolished and not replaced by anything.

They suggest

Quote

In the short term the Treasury should abolish SDLT and replace the lost revenues by reforming council tax – fixing the regressive top end of the system witha more proportional, or even progressive, tax on rental and imputed rental values would bring in the needed revenues easily, with far smaller economic costs.

Eventually the UK should rationalise its property taxation system by abolishing

SDLT altogether, and then rolling council tax, and business rates into one system, with everyone paying the same rate, set at roughly 20% of imputed rental income, comparable to extending VAT to property services. This would be roughly fiscally neutral on a static analysis, but may lead to large increases in revenue over time, which should be used to reduce other taxes.

 

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50 minutes ago, iamnumerate said:

Suppose it were only abolished for your first property? I.e Landlords still have to pay it?

Yes, I think this would help. Keep SDLT + 3% for anyone buying a second home and keep SDLT for anyone who already has a home but get rid of it for FTB or just swap it over so that nobody pays SDLT but everyone pays CGT instead (even on main homes) and get rid of inheritance tax.

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Just now, fru-gal said:

Yes, I think this would help. Keep SDLT + 3% for anyone buying a second home and keep SDLT for anyone who already has a home but get rid of it for FTB or just swap it over so that nobody pays SDLT but everyone pays CGT instead (even on main homes) and get rid of inheritance tax.

Paying CGT would reduce liquidity and so be undesirable.   I have just realized that in the short term this change would be bad for me as I have a lodger and it would make it easier for her to buy and leave.  Saying that I would rather be a little bit poorer and live in a better country (and I want my daughter to be able to leave home one day).

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47 minutes ago, iamnumerate said:

Paying CGT would reduce liquidity and so be undesirable.   I have just realized that in the short term this change would be bad for me as I have a lodger and it would make it easier for her to buy and leave.  Saying that I would rather be a little bit poorer and live in a better country (and I want my daughter to be able to leave home one day).

Well SDLT also apparently reduces liquidity and is undesirable. Nobody wants to pay tax! The way I see it is that CGT on all homes means it is much harder to avoid (no flipping or lying about it being a rental property), also no SDLT so someone buying doesn't have to stump up tax on the way in and CGT is on unearned gains so fairer than stamp duty which is more likely paid out of income. Also if they get rid of IHT or reduce it makes the CGT not as bad. Don't forget that most people paying large CGT will have paid virtually no or little SDLT (because they bought their property when prices were cheap) so this should be offset by them paying larger gains since they have benefited from price appreciation compared to FTB who are paying a higher SDLT because prices are so high (which they haven't benefited from but are made to pay for). Seems completely topsy turvy to me!

Edited by fru-gal

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1 hour ago, Freki said:

And that's why the one who should pay the tax should be the one who holds the asset.

Lol how would you ever enforce this? Even if you manage to force the seller to pay the tax, they just raise the price to compensate.

This is why taxing "the corporations" is really just taxing their customers.

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16 minutes ago, Locke said:

Lol how would you ever enforce this? Even if you manage to force the seller to pay the tax, they just raise the price to compensate.

This is why taxing "the corporations" is really just taxing their customers.

Are we in early 2000's to start a post with lol?

They can't raise the price, they already have. Rent is a function of the renters' affordability, not a function of the LL's constraints. Or how do you explain rent raises in London. Not all the BTL where bought in the last 3 years. They drummed about s24 meaning higher rents, they have started to fall in London...

Taxing houses means that the arbitrage between houses or other asset classes balances the decision for the later. 

About enforcing? I don't know Land Registry maybe? No matter if you are a company or a person. 

And btw, it is done in the US. I doubt this country is much dumber to fail implementing it.

Edited by Freki

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42 minutes ago, fru-gal said:

Well SDLT also apparently reduces liquidity and is undesirable. Nobody wants to pay tax!

Not all taxes are equal.  I would rather pay nothing to be honest, but I don't mind paying more tax than someone who earns less than me, or has a cheaper house or flies less.  However I don't think I should pay more than someone who is equal to me in every regard apart from the fact that I move more*.

(*I never move house for various reasons).

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42 minutes ago, Locke said:

Lol how would you ever enforce this? Even if you manage to force the seller to pay the tax, they just raise the price to compensate.

This is why taxing "the corporations" is really just taxing their customers.

Or their workers or their shareholders in the case of BTL probably not their customers as they cannot charge them more.

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1 hour ago, fru-gal said:

Yes, I think this would help. Keep SDLT + 3% for anyone buying a second home and keep SDLT for anyone who already has a home but get rid of it for FTB or just swap it over so that nobody pays SDLT but everyone pays CGT instead (even on main homes) and get rid of inheritance tax.

I think it should be more than +3%. If it 10% or 20% that would dissuade a lot more buyers (the tax receipts would be lower, but I think this would be worth it).

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It's intellectually offensive for the Adam Smith [would be rolling in his grave] Institute to focus on taxing property not land and/or replacement with consumption taxes ("such as VAT").

p21. "The government must reform the system. It should abolish SDLT whether or not it can find the revenue elsewhere."

That sentence  clarifies their stance. When the ASI campaigns for real Council Tax reform/LVT before calling for SDLT to be abolished is when I respect their opinion

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1 minute ago, guest_northshore said:

It's intellectually offensive for the Adam Smith [would be rolling in his grave] Institute to focus on taxing property not land and/or replacement with consumption taxes ("such as VAT").

p21. "The government must reform the system. It should abolish SDLT whether or not it can find the revenue elsewhere."

That sentence  clarifies their stance. When the ASI campaigns for real Council Tax reform/LVT before calling for SDLT to be abolished is when I respect their opinion

SDLT is not a tax on property it is a tax on transacting in land.  It is possible for someone living in a house worth £500k to have paid zero SDLT when they bought it.

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1 minute ago, iamnumerate said:

SDLT is not a tax on property it is a tax on transacting in land.  It is possible for someone living in a house worth £500k to have paid zero SDLT when they bought it.

I know - they want to eliminate it, perhaps replace with property taxes, with increased consumption taxes in the broader mix.

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If you buy the limited company holding the property, you are not paying SDLT correct? The land registry does not see any change. Refer to the Duke of Westminster who paid f*ckall  when his dad died.

Since the big mansions are disproportionately bought through limited companies, the loophole will widen and widen...

Edited by Freki

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4 minutes ago, guest_northshore said:

I know - they want to eliminate it, perhaps replace with property taxes, with increased consumption taxes in the broader mix.

They did say

Quote

In the short term the Treasury should abolish SDLT and replace the lost revenues by reforming council tax – fixing the regressive top end of the system witha more proportional, or even progressive, tax on rental and imputed rental values would bring in the needed revenues easily, with far smaller economic costs.

Sounds fair to me.

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I would worry about what lower SDLT means for prices...because of scarcity and competitive bidding prices are always as high as folks can afford ie as much as they can borrow.  Lower SDLT opens up more credit availability = higher prices.???

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  • 298 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
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      • up 5%



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